What ails Big Pharma

FORTUNE — One of America’s most far-seeing companies, Vertex Pharmaceuticals, the biopharmaceutical startup so memorably chronicled in journalist Barry Werth’s classic book, The Billion Dollar Molecule: The Quest for the Perfect Drug, is back.

Or rather, 20 years later, Werth is back with the sequel, The Antidote: Inside the World of New Pharma. The book revisits Vertex as the company grows into adolescence and actually achieves its goal of bringing a drug to market. Even though there is less drama this time and more mundane human-resource type challenges, Werth’s excellent writing takes the reader deep into the heart of Vertex and into the dilemma facing the biotech pioneers, and us all. We’re broke and have embraced low-cost generic medicine for the masses. Flogged by Wall Street to produce blockbusters, Big Pharma has responded with derivative me-too drugs. (The fifth cholesterol reducer on the market, anybody?) Now, the innovation pipelines are dry, the pharma companies are peering (or falling) over the patent cliff. And companies like Vertex are stoking fury with wildly priced super-orphan drugs for subsets of people with rare diseases.

This is the backdrop for The Antidote, in which Vertex struggles to navigate the FDA’s demands for patient safety, Wall Street’s demands for returns, and its own need to take big bold costly risks that are likely to end in failure. The sequel also keeps its eye on a more existential question plaguing corporate America: Can companies with innovation in their lifeblood stay true to their mission while satisfying Wall Street, without which there would be insufficient capital for innovation? Werth’s intimate account of Vertex’s fight for solvency suggest the answer might not be the one we want.

For starters, the science at Vertex is so complex and costly that a voyage to Mars looks easy by comparison. The company’s visionary founder and CEO Josh Boger tells his staff at one point, “If you give me 20 years and a half-trillion dollars, I guarantee I can put people on Mars and bring them back. I guarantee it … But making a new drug that changes people’s lives is almost beyond human understanding.” Reading Werth’s two books makes that a believable statement.

Vertex’s science is also potentially beyond our ability to fund. The company’s burn rate is spectacular. For much of the book, the company hemorrhages about $60,000 an hour. Its operating costs are $1 billion a year. All this for a company that may not have a single thing to sell at the end of the day. “A drug, unlike a social network or mobile app, was not something that you could dream up in your dorm room and turn into a billion-dollar seller,” writes Werth. “It was an ultramarathon relay in 100-degree heat.” But once Vertex has a deliverable and the grownups move in, the spirit of innovation teeters precariously.

The company in its early days, with its launch in 1989, is brash, bold, and unhinged. It is dominated by the far-seeing genius of Josh Boger, who at age 7 does experiments in a lab above his parents’ garage (including sending a hapless mouse soaring aloft on a Hindenberg-type contraption he rigs up). By fourth grade, he hands in a 400-page research paper on Africa. He does his graduate work at Harvard’s organic chemistry department and by his mid-thirties becomes Merck’s senior director of basic chemistry.

And then he has a vision. It is before the dawn of what, today, we call personalized medicine — genotyping particular patients to determine their response to a drug. What Boger wants is to create a better way to develop drugs: through a process called structure-based design in which scientists build up a new drug, atom by atom, after determining the type of molecule that might interrupt the disease process. (As Werth explains, the analogy most commonly used is that of a lock and key, in which scientists first model the interior of the cylinder in order to know what kind of key to build.) This is far more targeted than the traditional model for drug development, which includes such scattershot methods as screening natural elements like soil from a plateau in Norway and then asking, What might this do?

The early Vertex operates out of a construction company warehouse, and the scientists have no fixed workstations, but drift from desk to desk. When they are not bleary-eyed and unwashed from days-long stints in the lab, they are drinking heavily, smashing their motorcycles, burning with envy at competitors and colleagues. In the most dramatic moment, a scientist confronting errors in his marathon effort to crystallize an enzyme smashes a steel chair against the floor, howling at his colleagues, “You will all be stricken down!” (The chair gets deducted from his paycheck.)

By 1993, when the first book ends, Vertex has gone public and signed two development deals with Japanese drug companies, but has yet to bring a drug to market.

The Antidote picks up, weirdly, exactly where The Billion Dollar Molecule leaves off. The epilogue of the first book becomes the first chapter of the second. In short order, Vertex becomes corporatized. The lawyers come, as do the sales reps. As the company fights to get approval for its first marketable drug, Incivek, an oral treatment for Hepatitis C, there is an outbreak of practicality at the company. The adults on the board invite Josh Boger to step down as CEO (sadly leaving the book without its most vivid character halfway through). And the action is about to shift from the dark art of science to the dark science of commerce.

The company hires a seasoned chief commercial officer, Nancy Wysenski, to help launch the drug. As she recalls, “… what I found was an incredibly bright, high-intellect company that seemed to enjoy intellectual sparring. That was difficult for me, because that’s just not my thing. So I would sit in meetings and say, ‘My goodness, are we trying to get this done, or are we just trying to explore conceptually how many ways we can twist it and look at it?’”

In addition to working on a drug launch, the company works on its identity, taking corporate retreats to figure out how it can stay true to its founding spirit. The executive team determines that instead of simply rewarding employees for meeting performance goals, it will reward how employees approached their goals. Those who problem-solve with passion and intensity can still get the highest possible compensation, whether or not they meet performance goals. (And one executive concludes, if you actually meet a performance goal, then it was likely set too low.)

The struggle within Vertex is best captured as a tale of two layoffs. In 2003, an Indian virologist deemed to be expendable is laid off. Yet he believes the experiment he was working on is so vital, studying the impact of a toxic enzyme on mouse livers, that he begs to return on his severance to complete it. Vertex okays it. Working night and day, he proves that a molecule in development, VX-950, can protect the mouse against the enzyme (which mimics the effect of Hepatitis C). Boger is so enthralled by the data, he hires the scientist back.

Fast-forward eight years. The company’s chief technology officer, Mark Murcko, a 19-year Vertex veteran, reports to the office of his boss, the chief scientific officer Peter Mueller, and is axed with a single sentence: “Your position has been eliminated.” He must then schedule a chance to say goodbye and clean out his office. His email is turned off by the time he gets home. With this 180-degree turn from the company’s original spirit, a colleague declares, “There is no more Vertex … Vertex is dead. They should call it something else.”

Though the book sometimes devolves into a list-like chronicle of the company’s every doing, the preparations to pitch Incivek to an FDA advisory panel quicken the pace. You can actually feel company executives holding their breath.

And then comes the moment that has doomed the public image of biotechnology drugs: when the company prepares to announce what the price of Incivek will be. (Mind you, this is a drug that can actually clear the viral load of disease from patients so sick, all they can do is look forward to a liver transplant.) As one Vertex executive muttered at a company party, “You can’t go to parties and tell people you work for a pharmaceutical company. You work 80 hours a week your whole damn career, and people look at you like you’re evil.”

It is either testament to a great writing job by Werth, or the very real and harrowing nature of Vertex’s journey that when Wysenki announces the price for Incivek, $49,200 for a twelve-week course of the drug, that the reader thinks for a moment, is that all?

The Antidote is disappointingly thin on Boger’s life after he leaves the company. There is almost nothing about how he feels on being shown the door, though we circle back to him as a senior statesman, touring the world with Massachusetts Governor Deval Patrick on behalf of biotech. Yet we do learn that Boger’s successor, CEO Matthew Emmens, shares his naked contempt for Wall Street, and the analysts and investors who think they know what the future is, and what its price should be. As he tells them at a 2011 meeting, “Do you understand this company? I don’t think so … By what I read, I don’t think you understand our company. I’m going to do the best I can to prove you wrong again and again, because it’s been fun. But when does it stop?”

Ultimately, The Antidote concludes that these pioneer scientists innovate because they must, not because someone found the capital, or made sense of a project on a spreadsheet. As Boger put it after a corporate retreat, “We didn’t choose to be innovative … To not be innovative would be to have the blood sucked out of you. It was a physical need.” And a small subset of patients need their drugs. Whether we all want to pay for it is another matter entirely.

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